UNDERSTANDING BANKS ....
Retail (Universal) Banks refers to that banking which
targets individuals and the main focus of such banks is retail customer whereas
Wholesale Banks refers to that banking which targets corporate or big customers
and their main focus is providing services to corporate clients.
Wholesale Banking services which (in contrast to retail banking) are offered only to government agencies, pension funds, other institutional customers and to corporations with strong balance sheets and sound income statements. These services include cash management, fleet and equipment leasing, large-sum loans, loan participation, merchant banking, and trust services. Borrowing and lending amongst banks in inter-bank market, often involving very large sums.
Ticket size of loans given in retail banking is low and due to it impact of NPA will be less pronounced due to diversification as compared to wholesale banking where ticket size of loan is very high and due to it impact of NPA is more pronounced.
Loans such as car, housing, educational, personal loans are some of the examples of loans given in retail banking whereas loans such as loan for setting industry, machinery advance, export credit are some of the examples of loans given in wholesale banking.
Monitoring and recovery if the loan turn out to be NPA in retail banking is more difficult because customer base is wide whereas in case of wholesale banking due to low customer base it is easy to monitor as well recover the loan given to customers.
Cost of deposit is low in Retail (Universal) Banks because retail customers do not have the bargaining power due to less deposit with them whereas in case of corporate customers banks have to offer them high interest rates in order to attract funds from them. Retail (Universal) Banks have accessto low cost funds where as its not with the Wholesale Bank . The retail liabilities of the universal banks allow them to access funds at low rates which may not be the case with Wholesale Banks.
Retail banking requires large network of branches in order to cater to large customer base and hence it results in high operational costs while in case of wholesale banking small number of branches is sufficient to cater to corporate clients.
Wholesale Banking services which (in contrast to retail banking) are offered only to government agencies, pension funds, other institutional customers and to corporations with strong balance sheets and sound income statements. These services include cash management, fleet and equipment leasing, large-sum loans, loan participation, merchant banking, and trust services. Borrowing and lending amongst banks in inter-bank market, often involving very large sums.
Ticket size of loans given in retail banking is low and due to it impact of NPA will be less pronounced due to diversification as compared to wholesale banking where ticket size of loan is very high and due to it impact of NPA is more pronounced.
Loans such as car, housing, educational, personal loans are some of the examples of loans given in retail banking whereas loans such as loan for setting industry, machinery advance, export credit are some of the examples of loans given in wholesale banking.
Monitoring and recovery if the loan turn out to be NPA in retail banking is more difficult because customer base is wide whereas in case of wholesale banking due to low customer base it is easy to monitor as well recover the loan given to customers.
Cost of deposit is low in Retail (Universal) Banks because retail customers do not have the bargaining power due to less deposit with them whereas in case of corporate customers banks have to offer them high interest rates in order to attract funds from them. Retail (Universal) Banks have accessto low cost funds where as its not with the Wholesale Bank . The retail liabilities of the universal banks allow them to access funds at low rates which may not be the case with Wholesale Banks.
Retail banking requires large network of branches in order to cater to large customer base and hence it results in high operational costs while in case of wholesale banking small number of branches is sufficient to cater to corporate clients.
Happy Investing
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